Pensioners could be hit by a tax raid to fund Ed Miliband’s plans to cut university fees

Pensioners could be hit by a tax raid to fund Ed Miliband’s plans to cut university fees, it emerged last night.

The Labour leader is expected to announce details of the party’s policy to lower tuition fees from £9,000 to £6,000 within days, but is yet to agree with Shadow Chancellor Ed Balls on how the £2billion scheme could be funded.

It emerged last night that one option being considered by Mr Balls is cutting some of the tax breaks handed to people saving for a pension.

Pension tax breaks are worth about £24billion in total each year and have already been cut by Chancellor George Osborne.

More money could be saved by lowering the £40,000 ceiling on the amount savers can put aside each year tax-free or cutting the lifetime tax-free limit of £1.25million per pension, The Times reported last night.

Lord Mandelson weighed into the row yesterday, admitting Mr Miliband’s policy was not yet finished and insisting Labour must say where it will find the money.

Otherwise, he said, it would face a ‘credibility gap’ over its plans to cut the deficit.

The former business secretary, who was in charge of universities in Gordon Brown’s government, said it was ‘inconceivable’ that Labour could cut funding to the sector.

He told academics and university administrators in London: ‘If any reduction in fees is announced, and I’m not assuming that it will be, it’s absolutely vital that replacement funding from taxation is identified and announced at the same time.

‘Not in a generalised way, but in a specific way. Because that will ensure that no credibility gap is opened up either around university funding or the Labour Party’s commitment to reducing the fiscal deficit.’

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He supported Government claims that the rise to £9,000 fees had not led to a fall in applications, pointing out that even the poorest students were now more likely to apply.

Lord Mandelson also said cutting fees for UK students could increase the rate at which universities recruit from abroad to plug the funding gap – potentially ‘at the expense’ of home applicants.

When he campaigned for the Labour leadership, Mr Miliband proposed a graduate tax as an alternative to tuition fees. But Labour is yet to agree on its stance ahead of the election.

Lib Dem Business Secretary Vince Cable said cutting fees to £6,000 would be ‘foolish’, costing £10billion over five years

Lib Dem Business Secretary Vince Cable said cutting fees to £6,000 would be ‘foolish’, costing £10billion over five years. ‘[It] would be a populist gesture which would achieve nothing and do a lot of damage,’ he wrote to Mr Miliband.

Critics of cutting fees point out that the benefits would mainly go to the highest-earning graduates as they would end up paying less. A Labour Party spokesman said its policy on university fees would be ‘set out shortly’.

n A pact between Labour and the SNP would be ‘the ultimate nightmare scenario’ that could break up Britain, David Cameron warned yesterday.

He accused a ‘spineless’ Ed Miliband of betraying the Union by refusing to rule out a deal with the Scottish Nationalists.